I– Credit Crunch History
II – Credit Crunch is the most pressing
Abdul Raheem Al-Khawaja
17th of December 2008
I - Credit Crunch History
Who invented the term Credit Crunch?
It is unclear but it was used by America’
s FED Reserve
Bank as far back as 1967
What is Credit Crunch?
In simple terms Crisis caused by Banks being to
nervous to lend money to each other or to us
How the current Crisis sparked?
Years of Lax Lending inflated huge debt bubble
People borrowed cheap money & invested it into
Property
Lenders were free with their funds especially in the US;
where Billions of Dollars were granted/ sold to people
with poor Credit rating –called later Sub-prime
Borrowers
II - Credit Crunch is the most pressing issue:
 The speed that the Credit Crunch has reached us was
unexpected
 Developers in Private Sector until Oct. 08 were
ignoring Economical Fear
 Liquidity Crunch begun to bite
 Economic growth will be slow
 Mega projects across the region face delay due to the
fall out of Credit Crunch
 Buying & selling activities have slown down
considerably, thus the launch of several projects were
postponed
 Markets are changing dramatically every day!....
issue
III – Credit Crunch is forcing a review of
projects
IV – Confidence has been dented by Credit
Crunch & did Dubai lose its luster
In the years between 2005 and 2007 when US interest
rates rallied from 1.5% to 5.5% Housing Market started
to suffer, prices started falling, Homeowners started to
default on their mortgages
Conclusion:
 Credit Crunch is caused by Sub-prime Crisis which
rose to record levels in July 2007
 Global Downturn has deterred Finance Houses from
lending to one another as well as lending to
Homebuyers
 Decisions about Global Financial Storm & repairs to
damaged Economies are to be made elsewhere & not
in this room!....
III - Credit Crunch is forcing a review of projects:
1. In the wake of Credit Crunch & Global Economic Crisis
Real Estate Developers are struggling to:
a. Attract the support needed
b. Adopt strategies for survival (e.g. consolidating
core business & not venturing into new showcase
projects)
c. Restructuring through suspension of projects to
suit the current cycle & market dynamics
2. Traders & Suppliers
a. Falling of material Prices –(i.e. Prices of Steel /
Cement & Fuel are in decline)
b. Material stocks are piling-up due to previous
orders which are creating oversupply in the markets
c. Plant & Equipment will remain idle in the Forecourts
III - Credit Crunch is forcing a review of projects: Conclusion:

3. Contractors:  This is seen as a significant correction & may act as a

a. Contract period is to be extended to suit the Cash catalyst to increase transparency & raise standard in
Flow situation of developers banking sectors
b. Try to work with developers to find solutions that
suits the current scenario  Subprime Lending Crisis & subsequent tightening of
c. Exploring possibilities in securing Infa-structure Global Credit Markets shows that Banks need to make
development projects in particular for their positive effective Risk Management as their priority
survival through 2009, 2010 where the recession
expected to bottom out & the GDP would start
getting back on track
d. Scaling down their Human resources as salaries of
the employees were highly inflated
e. Contractors profit Margins will reduce due to
competition and there is a possibility that projects
may move from traditional lump slump contracts to
two stage Tendering. Partnering in a pain / gain
share model.

IV - Confidence has been dented by Credit Crunch & did It worked, the Town has
Dubai lose its luster:
 Tallest Building
Unlike most of its neighbors Dubai has almost no Oil or Gas  Largest Port
but it thrived; how:  Biggest Airport
 Home of Emirates Airline
It has something better: 3 pillars  Man made Islands
 Tourists & Millionaires are coming
1. Capital From neighboring States  Relaxed attitude to Islamic norms
2. Competence Imported workers from
around the world But speedy growth always causes indigestion
3. Ambition Make Dubai as business hub &
billionaires ground As Credit Crunch Challenges all three pillars of Dubai ‘
s Boom

Capital flow : has reversed its direction

Skilled Foreign Workers : could head home!...
The Ambition: is still there

Thanks: to our Rich Brother an hour up the road

to the Central Bank of UAE
to our oil rich neighbors

As International Crisis continues some economies are feeling

the benefit due to the squeeze on Global Prices. This relieves
Countries from inflation caused by Fuel imports whilst we here
shall observe less traffic in Dubai which will improve the Thank you!
Transport System & save time!....